Leon G. Cooperman, one of the early titans of the hedge fund industry, is gearing up for the biggest fight of his career: preserving his Wall Street legacy as regulators accuse him and his multibillion-dollar firm of insider trading.

The stakes are high, too, for the Securities and Exchange Commission, which on Wednesday sued Mr. Cooperman, a 73-year-old billionaire, accusing his firm, Omega Advisors, of reaping $4 million in illegal profit by using nonpublic information about an energy deal in 2010. The case is the most prominent to be brought by the agency since a court ruling that narrowed the definition of insider trading.

Hours after the civil complaint was filed, Mr. Cooperman fired back with a detailed five-page rebuttal sent to investors. He followed with a defiant conference call, opening with an off-color joke about an 80-year-old man bragging about having sex with an 18-year-old woman. He told investors on the call that he had refused to settle and that he would fight the S.E.C. in court.

The stage is set for what is expected to be a no-holds-barred legal battle between a gruff, outspoken investor and an agency that has come under criticism for not taking more cases to trial.

Mr. Cooperman, the son of a South Bronx plumber, is known for not holding back. In 2011, he wrote a much publicized “open letter” accusing President Obama of “villainizing the American dream” and the wealthy.

“It took me 50 years of hard work and playing by the rules to get where I got. I’m not going to let these people destroy my legacy,” Mr. Cooperman told investors on Wednesday.

Regulators contend that Mr. Cooperman used his position as one of the biggest shareholders in Atlas Pipeline Partners to gain confidential information from an unidentified executive at the company about the sale of one of its gas-processing facilities to another energy company in July 2010.

Mr. Cooperman had assured the executive that he would not trade on the information, but regulators said that despite making that promise, he had his firm accumulate a bigger position and profited when Atlas’s stock jumped 31 percent after the sale was announced.

The case also involves some family drama. Mr. Cooperman’s timely trades indirectly benefited a grandson, whose account Mr. Cooperman managed. Regulators said the money manager bought an Atlas Pipeline bond that rose in value after the deal.

And in another twist, Mr. Cooperman’s son, Wayne, who runs another hedge fund, may get drawn into the fray because of his own trading in the same stock.

In his letter, Mr. Cooperman said his son was prepared to testify on his behalf, noting that his son’s fund, Cobalt Capital Management, was betting against shares of Atlas Pipeline at the time and he is one of the biggest investors in his son’s firm.

Mr. Cooperman said he did not share any information about the sale of the gas-processing facility with his son.

In the complaint, however, the S.E.C. quoted an email that Mr. Cooperman sent to an unidentified relative — described as the manager of another hedge fund — informing him of the yet-unannounced $682 million deal. This same relative may have been the first to have sounded the alarm about unusual trading in shares and options of Atlas Pipeline the day the deal was announced, according to the S.E.C.

In a separate email, the relative writes to an executive at Atlas Pipeline, calling the options trading before the sale announcement “fishy” and “shady.” The relative goes on to say that “somebody should investigate” and then asks: “How do I become a whistle-blower.”

Mr. Cooperman’s son did not return a phone call seeking comment. But his firm did buy shares in Atlas Pipeline later in 2010, according to regulatory filings. Wayne Cooperman has not been charged with any wrongdoing.

Regulators also contended that Mr. Cooperman tried to conceal his actions after Omega received a subpoena relating to the Atlas trades some 17 months later by contacting one of Atlas’s executives in an attempt to “fabricate” a cover story in the event that either man was questioned by regulators about the trade.

Mr. Cooperman “allegedly undermined the public confidence in the securities markets and took advantage of other investors who did not have this information,” Andrew J. Ceresney, the S.E.C.’s chief of enforcement, said in a statement.

The civil case against Mr. Cooperman, filed in the Federal District Court in Philadelphia, would appear to sidestep a monkey wrench thrown into some insider trading prosecutions by a recent appellate court decision. That ruling made it more difficult to charge someone with insider trading if the person improperly leaking confidential information was not getting a personal benefit of some consequence.

The personal benefit issue would not seem to arise in this matter because regulators contend that Mr. Cooperman “misappropriated” the confidential information about the impending sale from the unidentified executive at Atlas Pipeline.

Ted Wells and Daniel Kramer, his lawyers at Paul, Weiss, Rifkind, Wharton & Garrison, issued a statement in which they called the allegations “entirely baseless.”

Mr. Cooperman said he was being charged with trading on paper gains and added that his firm never sold shares after the deal was announced. He said much of the firm’s trading was related to short-term positions in a stock that the firm had been bullish on for many years.

In some insider trading cases, hedge fund managers have been forced to shut their firms and return money to investors. On Wednesday, Mr. Cooperman emphasized that 35 percent of Omega Advisors’ $5.4 billion in assets under management belonged to members of the firm and that business would continue as usual. He added, however, that if the firm concluded that the S.E.C. case had “become too much of a distraction,” it would voluntarily give back money.

Omega is the second large hedge fund to be rocked by an insider trading investigation this year.

In June, securities regulators and federal prosecutors charged a top manager at Visium Asset Management with insider trading. The manager, Sanjay Valvani, committed suicide a week later. Visium’s founder, Jacob Gottlieb, whom the authorities did not charge, is in the process of shuttering the hedge fund after selling some of its funds to AllianceBernstein.

The two cases show that insider trading remains an issue in the nearly $3 trillion hedge fund industry even after a sweeping crackdown by federal prosecutors in Manhattan. That push led to convictions and guilty pleas from more than 80 people, including Raj Rajaratnam, the billionaire co-founder of the Galleon Group. Another firm, SAC Capital Advisors, a one-time $14 billion hedge fund, pleaded guilty to insider trading and paid $1.8 billion in fines to federal authorities.

In the civil complaint on Wednesday, the S.E.C. also accused Mr. Cooperman of failing to report in a timely manner information about his hedge fund’s holdings and other transactions in publicly traded companies in violation of federal securities laws more than 40 times.

Regulators said Mr. Cooperman “repeatedly violated” federal securities laws requiring investors to disclose when their equity interest in a publicly traded company rises above either a 5 or 10 percent stake.

Speaking at a private charity event in June at the Metropolitan Club in Manhattan, Mr. Cooperman addressed the looming investigation, telling the Wall Street audience, “I call companies, that’s what I do for a living.”

He said: “Every time I speak with a company I say the same thing: Don’t disenfranchise me if I ask you a question. Don’t answer a question if you’re not prepared to give anyone else that information, just tell me it’s confidential and we’ll move on.”

Correction:Sept. 23, 2016

An article on Thursday about a federal insider trading suit against Leon G. Cooperman, founder of the hedge fund Omega Advisors, rendered incorrectly the name of another firm where a top manager was charged in June with insider trading. It is Visium Asset Management, not Visium Asset Manager.

A version of this article appears in print on , on Page B1 of the New York edition with the headline: Fund Giant Accused of Insider Trading. Order Reprints | Today’s Paper | Subscribe